Well off, but stuck in underwater condo

Q: With all the creative geniuses in the U.S. such as Bill Gates, Mark Zuckerberg and the Google guys, why is there not even one innovative, out-of-the-box genius to help people like me in this real estate crisis?

I am a homeowner who has an exceptional work history, 800-plus FICO score, cash for a 20 percent down payment and low consumer debt.

The problem is my current home value has fallen dramatically, and I am deeply underwater (plus I have what appears to be the new c-word: condo). I had no plans to remain in my current home long-term, and I have a big desire to move on to a more desirable home that I could not afford pre-2007, but can now afford due to the decrease in home prices.

A refinance is not at all what I'm interested in doing, and I don't have extra money to pay my current mortgage company tens of thousands of dollars to get out of my mortgage.

Why can't just one person in America help me? I want to help stimulate the economy!

A: It's clear that you bought into the idea that home prices only go in one direction: up! Unfortunately, as we have seen, that is far from the case. Not only do housing prices go down, but they have dropped an average of more than 33 percent nationwide, and far more than that in Atlanta, where you live.

In Atlanta, as well as Las Vegas, Phoenix, Miami, parts of California and what seems like the entire state of Michigan, home prices have dropped as much as 60 percent from the highs of the real estate bubble in 2005 and 2006, which apparently is when you bought your property.

It wouldn't surprise us if your condo is worth just 25 to 35 percent of what you paid for it back then. We've heard from other residents of greater Atlanta whose homes have fallen as much as 75 percent in value, thanks to the high number of foreclosures in their neighborhoods.

A seller who wants to move on after this kind of home price depreciation is in a bind. You have several options, none of them particularly good.

First, you can scrabble together the cash to pay off your mortgage at closing. In other words, you could pay the difference between the sales price and what you owe on the loan. However much you may hate to part with that cash, if you have it, your lender will probably insist.

For many sellers, however, paying off the loan with savings is simply not feasible. If you can't do that, you may be able to do a short sale -- that is, to sell your home and get the bank to accept only the proceeds from the transaction.

Another option is a deed-in-lieu of foreclosure, where you hand over the keys to the property and the bank forgives your debt. Finally, you can let the home fall into foreclosure.

If you choose any of these options other than paying off the loan in full, your credit will take a dive. It's not magic -- it's just that you agreed to pay the mortgage in full and on time. If you don't, for whatever reason, that will be reported to the credit reporting bureaus.

We appreciate that all you want to do is to exchange your smaller home for a larger one. And we suppose that all the new stuff you buy for that home will contribute in a small way to stimulating the economy.

But the truth is that you made a bad deal, and now you want someone else to bail you out. I don't think that's going to happen, especially not if you're making good money.

The one thing you have on your side is timing. If you can afford to buy another home, you should do so. At that point, you can list your condo for sale and see if anyone will buy it for an amount that is acceptably close to the amount you owe. If not, you can look into doing a short sale, deed-in-lieu of foreclosure or a true foreclosure.

What you need to do now is speak with a real estate attorney who can help you understand what your options are and what their consequences will be.

We can tell that you're frustrated with the situation and feel stuck. This wasn't part of your master plan, and now it feels as though staying put is the only option available to you. Nevertheless, that isn't the case. When you feel stuck, the best thing you can do is take a step in any direction. While it might turn out to be the wrong direction, at least you're moving again and that in itself is a win.

Good luck, and let us know what happens.

(Ilyce R. Glink's latest book is "Buy, Close, Move In!" Samuel J. Tamkin is a Chicago-based real estate attorney. If you have questions, you can call Ilyce's radio show toll-free (800-972-8255) any Sunday, from 11a-1p EST. Contact Ilyce and Sam through her website, http://www.thinkglink.com.)